Worth re-mortgaging to get a BTL?
Discussion
I have about 50k of equity in my house, we were thinking of moving, but really don't need to. So, would it be worth re-mortgaging the current place and then using that as a deposit for an other, then letting it out?
We have a very good tracker (0.98% Above BR), and any additional money can be borrowed at a current rate. Then take out a new BTL mortgage using the 50k on a 200k house, rent it out. At 5.59% fixed it'd be £800/month mortgage, and could rent out £850-£900 a month, so it'd at least break even, but we'd also be paying off that mortgage as well.
Forgetting the 2nd house idea, is it worth borrowing money on my current house to fund an other?
We have a very good tracker (0.98% Above BR), and any additional money can be borrowed at a current rate. Then take out a new BTL mortgage using the 50k on a 200k house, rent it out. At 5.59% fixed it'd be £800/month mortgage, and could rent out £850-£900 a month, so it'd at least break even, but we'd also be paying off that mortgage as well.
Forgetting the 2nd house idea, is it worth borrowing money on my current house to fund an other?
Sarnie said:
If you can borrow money at base + 0.98% then do it as you won't get it cheaper anywhere else.
The first issue that jumps out at me is that you are not going to be able to borrow the full £50k of equity from your current propery as that will take you to 100%LTV....................
I didn't make it very clear, sorry. The additional borrowing will be at a new rate provided by my mortgage company, but I keep the 0.98% for the current part of the mortgage.The first issue that jumps out at me is that you are not going to be able to borrow the full £50k of equity from your current propery as that will take you to 100%LTV....................
I actually have more than 50k in the house, that's what I would take out.
The idea is sound in principle, it's easier to get a mortgage on your own home and you'll often get a better rate. However, I'm not sure that buying a BTL property that at best only breaks even is a clever idea though. You are effectively speculating that the property is going to go up in value, which in the long term it probably will, but thats not guaranteed. In the short/medium term it could easily go down in value if the Eurozone were to go really pear shaped and say Labour get voted in at the next election.
If your mortgage is £800/month and the flat will let for £850/£900 than that is likely to make a loss once you take into account agents fees, maintenance etc and even if you do make a profit then remember that you can only offset the interest part of the mortgage against tax, not the whole amount.
If your mortgage is £800/month and the flat will let for £850/£900 than that is likely to make a loss once you take into account agents fees, maintenance etc and even if you do make a profit then remember that you can only offset the interest part of the mortgage against tax, not the whole amount.
I know people who have done this and they aren't bothered about the exact details of the finance, they've done it so they can give their kids houses.
Wish I'd had the foresight to do it when the market was on its arse in the mid 90s. These things always look bleedin' obvious in hindsight.
Wish I'd had the foresight to do it when the market was on its arse in the mid 90s. These things always look bleedin' obvious in hindsight.
illmonkey said:
At 5.59% fixed it'd be £800/month mortgage, and could rent out £850-£900 a month, so it'd at least break even..
It probabbly wouldnt.If you rented it out for every month of the year, didnt have any costs, and didnt have to pay anyone to manage it, then you could possibly make £1,200 a year. Before paying any tax on it.
If it didnt rent for just a single month of that year, you've already lost the majority of that £1,200.
Would you really want the hassle, or am I missing something here?
ETA: Sorry, Inkyfingers you've already summed up what we were thinking in your post above.
Edited by Burnham on Wednesday 7th November 16:53
Burnham said:
It probabbly wouldnt.
If you rented it out for every month of the year, didnt have any costs, and didnt have to pay anyone to manage it, then you could possibly make £1,200 a year. Before paying any tax on it.
If it didnt rent for just a single month of that year, you've already lost the majority of that £1,200.
Would you really want the hassle, or am I missing something here?
your yield isnt great , what if you use ana agent? insurance? maintenance? if you have to subsidies te rent it will not be worth it.If you rented it out for every month of the year, didnt have any costs, and didnt have to pay anyone to manage it, then you could possibly make £1,200 a year. Before paying any tax on it.
If it didnt rent for just a single month of that year, you've already lost the majority of that £1,200.
Would you really want the hassle, or am I missing something here?
illmonkey said:
I
We have a very good tracker (0.98% Above BR), and any additional money can be borrowed at a current rate. Then take out a new BTL mortgage using the 50k on a 200k house, rent it out. At 5.59% fixed it'd be £800/month mortgage, and could rent out £850-£900 a month, so it'd at least break even, but we'd also be paying off that mortgage as well.
Forgetting the 2nd house idea, is it worth borrowing money on my current house to fund an other?
I dont think you would get a buy to let mortgage as the rent has to cover 125% of the mortgage payment. We have a very good tracker (0.98% Above BR), and any additional money can be borrowed at a current rate. Then take out a new BTL mortgage using the 50k on a 200k house, rent it out. At 5.59% fixed it'd be £800/month mortgage, and could rent out £850-£900 a month, so it'd at least break even, but we'd also be paying off that mortgage as well.
Forgetting the 2nd house idea, is it worth borrowing money on my current house to fund an other?
You would fund the despot for the BTL from the equity on your house, correct?
jonny70 said:
I dont think you would get a buy to let mortgage as the rent has to cover 125% of the mortgage payment.
You would fund the despot for the BTL from the equity on your house, correct?
Correct.You would fund the despot for the BTL from the equity on your house, correct?
Yes, the yeild isn't great. And that rate is from my current provider, which isn't great, so I'd get a lower one.
I'm thinking longer term (in the hope) that the prices go up and it'll then also have equity.
It was just a idea I had, rather than getting a bigger house for us, which we don't need, we could rent a second one out.
What about buying a few cheaper houses in cheaper areas that'll rent out for £450-500/pm?
£50-60k up north will get you a 2 bed terrace that'll rent for £400-500pm.
You could buy 3-4 of those for one of your £200k properties and be better off by far. Also spread the risk...
Might be worth a look?
£50-60k up north will get you a 2 bed terrace that'll rent for £400-500pm.
You could buy 3-4 of those for one of your £200k properties and be better off by far. Also spread the risk...
Might be worth a look?
RJD223 said:
What about buying a few cheaper houses in cheaper areas that'll rent out for £450-500/pm?
£50-60k up north will get you a 2 bed terrace that'll rent for £400-500pm.
You could buy 3-4 of those for one of your £200k properties and be better off by far. Also spread the risk...
Might be worth a look?
Good advice, owning a number of smaller properties also means that even if one or two are empty for a while you are still getting some income in that month.£50-60k up north will get you a 2 bed terrace that'll rent for £400-500pm.
You could buy 3-4 of those for one of your £200k properties and be better off by far. Also spread the risk...
Might be worth a look?
illmonkey said:
Cheapest house where I am is £130k and its horrible.
I'll put te idea to be for a year and review.
Does it matter where you live though? Only if you plan on doing the maintenance etc. yourself.I'll put te idea to be for a year and review.
Like RJD223 says, 50k will get you something like this in Bolton - a 3 bed terrace, which will rent for £400-450.
A quarter of the borrowing for half the income? If you've going to have someone else manage and maintain it then you can look further afield than your own town - it has nothing to do with your own taste and whether you would live there.
maffski said:
illmonkey said:
Cheapest house where I am is £130k and its horrible.
I'll put te idea to be for a year and review.
Does it matter where you live though? Only if you plan on doing the maintenance etc. yourself.I'll put te idea to be for a year and review.
Like RJD223 says, 50k will get you something like this in Bolton - a 3 bed terrace, which will rent for £400-450.
A quarter of the borrowing for half the income? If you've going to have someone else manage and maintain it then you can look further afield than your own town - it has nothing to do with your own taste and whether you would live there.
Are there any other area's of Northshire worth looking at, and why? Personally I only buy places I'd be happy to live in, so I'm looking for nice family homes.
98elise said:
Are there any other area's of Northshire worth looking at, and why? Personally I only buy places I'd be happy to live in, so I'm looking for nice family homes.
For BTL you should focus on whats rentable, not what you would like to live in, you need to make sure its attractive to prospective tennents, who may not be your current neighbours 
98elise said:
Thats not a bad return, around the 10% mark. The only issue I would have with something like that is that in a 1 mile radius there are 60 odd houses for rent, a similar search in my area shows less than 30. Are there too many on the market in that area?
Are there any other area's of Northshire worth looking at, and why? Personally I only buy places I'd be happy to live in, so I'm looking for nice family homes.
True, but I literally stuck a town in at random. I would have though pretty much any large town/city that's not in the south would have places at similar pricesAre there any other area's of Northshire worth looking at, and why? Personally I only buy places I'd be happy to live in, so I'm looking for nice family homes.
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